CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS UNAUDITED QUARTERLY REPORT

Transcription

1 UNAUDITED QUARTERLY REPORT FOR THE QUARTER AND FINANCIAL PERIOD ENDED 30 JUNE 2018

2 CONTENTS PAGE(S) INVESTORS' LETTER 1 MANAGER S REPORT 2-7 Fund Objective and Policy Performance Data Market Review Fund Performance Portfolio Structure Market Outlook Investment Strategy Unit Holdings Statistics Soft Commissions and Rebates SHARIAH ADVISER'S REPORT 8 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME 9 UNAUDITED STATEMENT OF FINANCIAL POSITION 10 UNAUDITED STATEMENT OF CHANGES IN EQUITY 11 UNAUDITED STATEMENT OF CASH FLOWS 12 NOTES TO THE FINANCIAL STATEMENTS DIRECTORY 28

3 INVESTORS' LETTER Dear Valued Investor, Thank you for your continued support and for the confidence that you have placed in us. We are pleased to share that CIMB-Principal Asset Management Berhad ( CIMB-Principal ) Malaysia has achieved RM55 billion in Asset under Management ( AUM ) as at July The Edge Thomson Reuters Lipper Malaysia Fund Awards 2018 Best Fund Over 5 Years, Equity Global - Malaysia : CIMB-Principal Global Titans Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB-Principal Asian Equity Fund Best Fund Over 5 Years, Equity Asia Pacific ex Japan - Malaysia : CIMB Islamic Asia Pacific Equity Fund Best Fund Over 5 Years, Equity Malaysia Diversified - Malaysia : CIMB-Principal Equity Growth & Income Fund Best Fund Over 5 Years, Mixed Asset MYR Bal - Malaysia : CIMB-Principal Income Plus Balance Fund Best Fund Over 3 Years, Equity Global - Malaysia : CIMB-Principal Global Titans Fund In addition, we received recognition from Fundsupermart.com for Fund House of the Year award and Recommended Unit Tust 2018/2019 awards for the following funds: CIMB-Principal Global Titans Fund CIMB-Principal Asia Pacific Dynamic Income Fund CIMB Islamic Asia Pacific Equity Fund CIMB-Principal Greater China Equity Fund CIMB-Principal PRS Plus Conservative CIMB-Principal PRS Plus Growth Our latest accomplishment is The Asset Triple A Private Banking, Wealth Management, Investment and Exchange-Traded Fund ( ETF ) Awards 2018 where we have been recognized for the Best Wealth Manager in Malaysia. These prestigious awards are a celebration of the trust that you have placed in us and testament to our capability in bringing potential value to your financial goals and needs. We look forward to serving you for many years to come and to the best of our ability. Thank you. Yours faithfully, for CIMB-Principal Asset Management Berhad Munirah Khairuddin Chief Executive Officer 1

4 MANAGER S REPORT FUND OBJECTIVE AND POLICY What is the investment objective of the Fund? The Fund aims to achieve moderate capital growth by investing in a portfolio of Shariah-compliant Collective Investment Schemes ( CIS ) that invest in Shariah-compliant equities and/or Sukuk. Has the Fund achieved its objective? For the financial period under review, the Fund fell by 3.16%, underperforming the benchmark which was down by 0.60%. What are the Fund investment policy and principal investment strategy? The Fund aims to invest at least three (3) Shariah-compliant Collective Investment Schemes investing predominantly in Shariah-compliant equities and/or Sukuk. In line with its objective, the investment policy and strategy of the Fund is to maintain a balanced portfolio between Shariahcompliant Collective Investment Schemes investing predominantly in Shariah-compliant equities and Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk. As a balanced Fund, the Fund will invest between 40% to 60% of its Net Asset Value ( NAV ) in Shariah-compliant Collective Investment Schemes investing predominantly in Shariah-compliant equities as well as between 40% to 60% of its NAV in Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk. The Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk will provide some capital stability to the Fund whilst the Shariah compliant Collective Investment Schemes investing predominantly in equity portion will provide the added return in a rising market. The Fund may also invest up to 5% of its NAV in Shariah-compliant liquid assets such as Shariah-compliant money market instruments and/or Islamic Deposits for liquidity purposes. The allocation between the Shariah-compliant Collective Investment Schemes is done through a combination of macroeconomic data, liquidity trends and the outlook to overweight or underweight a particular Shariah-compliant Collective Investment Schemes. The Fund may invest in Shariah-compliant Collective Investment Schemes that focus its investment in the Asia Pacific ex Japan region, i.e. companies that are domiciled in, listed in, and/or have operations or businesses that focus in the Asia Pacific ex Japan region, where the regulatory authority is an ordinary or associate member of the International Organization of Securities Commissions ( IOSCO ) which include but not limited to Australia, the People's Republic of China, Hong Kong SAR, India, Indonesia, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and Sri Lanka. The Fund is designed to focus in local investments under general market conditions. When deemed necessary, we may also invest in foreign market to exploit the investment opportunities. Fund category/type Wholesale Fund (Fund-of-funds - Shariah-compliant)/Growth How long should you invest for? Recommended medium term to long term Indication of short-term risk (low, moderate, high) High When was the Fund launched? 24 November 2017 What was the size of the Fund as at 30 June 2018? RM0.01 million (0.01 million units) What is the Fund s benchmark? As a Fund-of-Funds, the Fund is benchmark unconstrained, i.e. it will be managed without reference to any specific benchmark. However, for performance comparison purpose, the Fund can be compared to the 50% Quantshop GII Medium Index + 50% MSCI AC Asia ex Japan Islamic Index. 2

5 FUND OBJECTIVE AND POLICY (CONTINUED) CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS What is the Fund distribution policy? The Fund is not expected to pay any distribution. However, we have the discretion to make income distribution on an ad-hoc basis, depending on the availability of realised income and/or realised gains, as well as the performance of the Fund. What was the net income distribution for the financial period from 24 November 2017 (date of launch) to 30 June 2018? There was no distribution made for the financial period from 24 November 2017 (date of launch) to 30 June PERFORMANCE DATA Details of portfolio composition of the Fund for the unaudited financial period are as follows: % Shariah-compliant Collective Investment Schemes Cash and other net assets Performance details of the Fund for the unaudited financial period are as follows: NAV (RM Million) 0.01 Units in circulation (Million) 0.01 NAV per unit (RM) (date of launch) to Highest NAV per unit (RM) Lowest NAV per unit (RM) Total return (%) (3.16) - Capital growth (%) (3.16) - Income distribution (%) - Management Expense Ratio ( MER ) (%) 0.15 Portfolio Turnover Ratio ( PTR ) (times) # 0.53 # The Fund s PTR for the financial period under review, was 0.53 times, mainly due to investment activities on the back of unit creations. 3 Since inception to % Annual total return (3.16) (Launch date: 24 November 2017) Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. All performance figures for the financial period have been extracted from Lipper.

6 MARKET REVIEW (1 APRIL 2018 TO 30 JUNE 2018) Local Equity CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS The FTSE Bursa Malaysia EMAS Shariah Index ( FBM Shariah Index ) fell by 1, points or 8.60% to 12, points over the financial period under review. The FBM Shariah Index started on a positive note in the quarter by rising 0.4% in April 2018 on the back of outperformance in construction and financial sectors. The market then sold off in May 2018, rattled by headline news of a higher RM1 trillion national debt burden, concerns about the fiscal position and sovereign credit rating following the zero-rating of the Good and Services Tax ( GST ), cancellation of mega infrastructure projects and the sanctity of toll roads concession agreements. Sentiment was further dampened by the weak first quarter of 2018 corporate earnings season. Meanwhile, global trade tensions were back in focus and there was fear of contagion from Italian politics. These were happening against a backdrop of Central Banks plans to normalise monetary policies, leading to worries of possible policy missteps. The sell-off continued into June 2018 on the back of heavy foreign selling, as investors repriced policy risk. Foreigners net sold RM4.9 billion in June 2018, bringing the RM6 million in 2018 total net foreign outflow to RM6.8 billion against the net inflow of RM10.8 billion in Asian Equity The Morgan Stanley Capital International All Country ("MSCI AC") Asia ex Japan Islamic Index (MIASJ Index) declined by 6.36%, in US Dollar ( USD ) term, closing at 1, points over the financial period under review. In Malaysian Ringgit ( MYR ) term, the Index fell by 2.22%. Absolute returns were positive in April 2018 for all Asia Pacific ex-japan markets except Information Technology ( IT ) sector. Most Asian currencies fell in the month of April 2018 except Philippine Peso ( PHP ) (+1%) while Hong Kong Dollar ( HKD ) remained flat. Regional equities then drifted lower in May 2018, dragged down by Association of Southeast Asian Nations ( ASEAN ), Korea, and India. Key factors that depressed investor sentiment were risk of de-synchronization of global growth (US strong/europe softer), USD strength, higher oil prices, the protracted nature of trade renegotiation, and political developments in Italy which added pressure to European peripheral bonds. Negative sentiment continued in June 2018 as investors risk tolerance has been pulled down by growing risk of a trade war, hawkish US Federal Reserve (the Fed ) statement and poor China economic data alongside a significant slide in the Chinese Yuan ( CNY ). FUND PERFORMANCE 3 months to months to Since inception to % % % Income - - Capital (3.16) (3.16) (3.16) Total Return (3.16) (3.16) (3.16) Benchmark ^ (0.60) (1.57) (2.76) Average Total Return N/A N/A (5.21) For the 3-month financial period, the Fund fell by 3.16%, while the benchmark was down by 0.60%. The underperformance of the Fund relative to its benchmark was driven mainly by the allocation into Malaysian equities. Since inception, the Fund fell by 3.16%, underperforming the benchmark which declined by 2.76%. 4

7 FUND PERFORMANCE (CONTINUED) CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS ^ As a Fund-of-Funds, the Fund is benchmark unconstrained, however, for performance comparison purpose, the Fund can be compared to the MSCI AC Asia ex Japan Islamic Index and Sukuk Index. Changes in NAV NAV (RM Million) 0.01 NAV/Unit (RM) The Fund saw positive net inflow from unit creations over the financial period. The total NAV grew to MYR0.01 million with NAV at RM as at 30 June Performance data represents the combined income and capital return as a result of holding units in the Fund for the specified length of time, based on NAV to NAV price. The performance data assumes that all earnings from the Fund are reinvested and are net of management and trustee fees. Past performance is not reflective of future performance and income distributions are not guaranteed. Unit prices and income distributions, if any, may fall and rise. All performance figures for the financial period have been extracted from Lipper. PORTFOLIO STRUCTURE Asset allocation (% of NAV) Shariah-compliant Collective Investment Schemes Cash and other net assets TOTAL During the financial period under review, the Fund was fully invested with minimal level of liquid assets maintained primarily for redemption purposes. At as 30 June 2018, a material amount of creations was still sitting in receivables. 5

8 MARKET OUTLOOK* Local Equity We expect the Malaysia equity market to remain volatile in the second half of 2018 given a more challenging macro backdrop. Developments in the local front will also remain fluid especially with respect to the changes of Government-Linked Companies ( GLC ) management team and the Government s fiscal management. Although we remain fairly defensive and cashed up in April and May 2018, we are cognizant of the fact that; buy-side positioning remains too bearish; valuations at selective sectors remain quite compelling and there is risk that global outflows from emerging markets may be at a tail end in the short term. As a result, we have turned more neutral on Malaysian equities and we will start to deploy cash gradually into quality names with reasonable risk/reward profiles during market retracements. We maintain our view that Malaysia equities could outperform regional peers, in the longer term, given better risk premiums as a result of better governance. Asian Equity We are neutral on Asian equities in the short term. A range-bound scenario is likely due to the ongoing US-China trade rift and USD strength. Asian currencies, especially the CNY, are an important indicator of flows and sentiment. Our view is that the trade rift is more about intellectual property protection than just tariffs on goods and hence any softening of the stance on the former should be taken positively. Meantime, Asian corporate earnings are expected to grow by +11% and +9% in 2018 and 2019 respectively, which should underpin longer term returns. While this is a downgrade from consensus estimates of +13% and +10%, it should not be a surprise given how markets have been de-rated. We are positive on Asian equities in the longer term. * This market outlook does not constitute an offer, invitation, commitment, advice or recommendation to make a purchase of any investment. The information given in this article represents the views of CIMB-Principal or based on data obtained from sources believed to be reliable by CIMB-Principal. Whilst every care has been taken in preparing this, CIMB-Principal makes no guarantee, representation or warranty and is under no circumstances liable for any loss or damage caused by reliance on, any opinion, advice or statement made in this market outlook. INVESTMENT STRATEGY The Fund will continue to remain fully invested in the Shariah-compliant Collective Investment Schemes with minimal cash kept for liquidity purposes. UNIT HOLDINGS STATISTICS Breakdown of unit holdings by size as at 30 June 2018 are as follows: Size of unit holdings (units) No. of unit holders No. of units held % of units held (million) 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, ,001 and above Total

9 SOFT COMMISSIONS AND REBATES CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS CIMB-Principal Asset Management Berhad (the Manager ) and the Trustee (including their officers) will not retain any form of rebate or soft commission from, or otherwise share in any commission with, any broker in consideration for directing dealings in the investments of the Funds unless the soft commission received is retained in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. All dealings with brokers are executed on best available terms. During the financial period under review, the manager and the trustee did not receive any rebates from the brokers or dealers but have retained soft commissions in the form of goods and services such as financial wire services and stock quotations system incidental to investment management of the Funds. 7

10 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS We have acted as the Shariah Adviser of CIMB Islamic Balanced Wholesale Fund-Of-Funds (the Fund ) for the financial period ended 30 June Our responsibility is to ensure that the procedures and processes employed by CIMB-Principal Asset Management Berhad (the Manager ) are in accordance with Shariah and Shariah Investment Guidelines. In our opinion, the Manager has managed and administered the Fund in accordance with the Shariah Investment Guidelines of the Fund and complied with applicable guidelines, rulings or decisions issued by the Securities Commission Malaysia pertaining to Shariah matters for the financial period ended 30 June In addition, we confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission Malaysia and, where applicable the Shariah Advisory Council of Bank Negara Malaysia. For investments other than the abovementioned, we have reviewed the same and are of the opinion that these investments were in accordance with the Shariah Investment Guidelines of the Fund. This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report and we shall not be liable for any errors or non-disclosure on the part of the Manager. For and on-behalf of Shariah Adviser CIMB Islamic Bank Berhad ASHRAF GOMMA ALI Director/Regional Head, Shariah & Governance/Designated Person Responsible for Shariah Advisory Kuala Lumpur 30 August

11 UNAUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD FROM 24 NOVEMBER 2017 (DATE OF LAUNCH) TO 30 JUNE 2018 Note (date of launch) to RM INVESTMENT INCOME Net loss on financial assets at fair value through profit or loss 8 (188) Other income 4 2,450 2,262 EXPENSES Management fee 5 3 Trustee s fee 6 - Audit fee 1,478 Tax agent s fee 891 Other expenses 88 2,460 LOSS BEFORE TAXATION (198) Taxation 7 - LOSS AFTER TAXATION AND TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL PERIOD (198) Loss after taxation is made up as follows: Realised amount (10) Unrealised amount (188) (198) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 9

12 UNAUDITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS Note RM ASSETS Cash and cash equivalents (Shariah-compliant) Financial assets at fair value through profit or loss (Shariah-compliant) 8 6,812 Amount due from Manager 2,690 Other receivable 2,445 TOTAL ASSETS 12,237 LIABILITIES Accrued management fee 3 Amount due to Trustee - Other payables and accruals 2,446 TOTAL LIABILITIES 2,449 NET ASSET VALUE OF THE FUND 9,788 EQUITY Unit holders capital 9,986 Accumulated losses (198) NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 9,788 NUMBER OF UNITS IN CIRCULATION (UNITS) 10 10,107 NET ASSET VALUE PER UNIT (RM) The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 10

13 UNAUDITED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD FROM 24 NOVEMBER 2017 (DATE OF LAUNCH) TO 30 JUNE 2018 Unit holders Accumulated capital losses Total RM RM RM Balance as at 24 November 2017 (date of launch) Movement in unit holders contributions: - Creation of units from applications 9,986-9,986 Total comprehensive loss for the financial period - (198) (198) Balance as at 30 June ,986 (198) 9,788 The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 11

14 UNAUDITED STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD FROM 24 NOVEMBER 2017 (DATE OF LAUNCH) TO 30 JUNE 2018 Note RM CASH FLOWS FROM OPERATING ACTIVITIES Purchase of collective investment schemes (7,000) Payments for other fees and expenses (11) Other income 5 Net cash used in operating activities (7,006) CASH FLOWS FROM FINANCING ACTIVITIES Cash proceeds from units created 7,296 Net cash generated from financing activities 7,296 Net increase in cash and cash equivalents 290 Cash and cash equivalents at the end of the financial period Cash and cash equivalents comprised of: Bank balances 290 Cash and cash equivalents at the end of the financial period The accompanying notes to the financial statements form an integral part of the unaudited financial statements. 12

15 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 24 NOVEMBER 2017 (DATE OF LAUNCH) TO 30 JUNE THE FUND, THE MANAGER AND ITS PRINCIPAL ACTIVITY CIMB Islamic Balanced Wholesale Fund-of-Funds (the Fund ) is governed by a Principal Deed dated 20 November 2017 (the Deed ), made between CIMB-Principal Asset Management Berhad (the Manager ) and PB Trustee Services Berhad (the Trustee ). The Fund aims to invest at least three (3) Shariah-compliant Collective Investment Schemes investing predominantly in Shariah-compliant equities and/or Sukuk. In line with its objective, the investment policy and strategy of the Fund is to maintain a balanced portfolio between Shariah-compliant Collective Investment Schemes investing predominantly in Shariahcompliant equities and Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk. As a balanced Fund, the Fund will invest between 40% to 60% of its NAV in Shariahcompliant Collective Investment Schemes investing predominantly in Shariah-compliant equities as well as between 40% to 60% of its NAV in Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk. The Shariah-compliant Collective Investment Schemes investing predominantly in Sukuk will provide some capital stability to the Fund whilst the Shariah-compliant Collective Investment Schemes investing predominantly in equity portion will provide the added return in a rising market. The Fund may also invest up to 5% of its NAV in Shariah-compliant liquid assets such as Shariah-compliant money market instruments and/or Islamic Deposits for liquidity purposes. The allocation between the Shariah-compliant Collective Investment Schemes is done through a combination of macroeconomic data, liquidity trends and the outlook to overweight or underweight a particular Shariah-compliant Collective Investment Schemes. The Fund may invest in Shariah-compliant Collective Investment Schemes that focus its investment in the Asia Pacific ex Japan region, i.e. companies that are domiciled in, listed in, and/or have operations or businesses that focus in the Asia Pacific ex Japan region, where the regulatory authority is an ordinary or associate member of the IOSCO which include but not limited to Australia, the People's Republic of China, Hong Kong SAR, India, Indonesia, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and Sri Lanka. All investments are subjected to the Securities Commission Malaysia ( SC ) Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, SC requirements, the Deeds, except where exemptions or variations have been approved by the SC, internal policies and procedures and the Fund s objective. The Manager, a company incorporated in Malaysia, is a subsidiary of CIMB Group Sdn Bhd and regards CIMB Group Holdings Berhad as its ultimate holding company. The Manager is also an associate of Principal International (Asia) Limited, which is a subsidiary of Principal Financial Group Inc. The principal activities of the Manager are the establishment and management of unit trust funds and fund management activities. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements: (a) Basis of preparation The financial statements have been prepared in accordance with the provisions of the Malaysian Financial Reporting Standards ( MFRS ) and International Financial Reporting Standards ( IFRS ). 13

16 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. It also requires the Manager to exercise their judgment in the process of applying the Fund s accounting policies. Although these estimates and judgment are based on the Manager s best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(j). Standards, amendments to published standards and interpretations to existing standards that are effective: The Fund has applied the following amendments for the first time for the financial period beginning 24 November 2017 (date of launch): Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiative introduce an additional disclosure on changes in liabilities arising from financing activities. The adoption of these amendments did not have any impact on the current financial period or any prior financial period and is not likely to affect future periods. The standards, amendments to published standards and interpretations to existing standards that are applicable to the Fund but not yet effective and have not been early adopted are as follows: (i) Financial year beginning on/after 1 January 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 14

17 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Basis of preparation (continued) (i) Financial year beginning on/after 1 January 2018 (continued) MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments 1 are always measured at fair value through profit or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument 2 is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest 3. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives 1. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit loss ( ECL ) model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit loss model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard on 1 January 2018: There will be no impact on the Fund's accounting for financial assets as the Fund's equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. There will be no impact on the Fund's accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assessments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. ¹ For the purposes of the investments made by the Fund, equity instruments and derivatives refers to Shariah-compliant equity instruments and Shariah-compliant derivatives. ² For the purposes of the investments made by the Fund, debt instruments refers to Sukuk. ³ For the purposes of this Fund, interest refers to profits earned from Shariah-compliant investments. 15

18 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities Classification The Fund designates its investment in Shariah-compliant collective investment scheme as financial assets at fair value through profit or loss at inception. Financial assets are designated at fair value through profit or loss when they are managed and their performance evaluated on a fair value basis. Financing and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and have been included in current assets. The Fund s financing and receivables comprise cash and cash equivalents, amount due from Manager and amount due from the Manager of collective investment scheme. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. The Fund classifies accrued management fee, amount due to Trustee, and other payables and accruals as other financial liabilities. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the asset. Shariah-compliant investments are initially recognised at fair value. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Unrealised gains or losses from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial period which they arise. Shariah-compliant collective investment scheme is valued based on the most recent published NAV per unit or share of such Shariah-compliant collective investment scheme or, if unavailable, on the last published price of such unit or share (excluding any sales charge included in such selling price). Financing and receivables and other financial liabilities are subsequently carried at amortised cost using the effective profit method. 16

19 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Financial assets and financial liabilities (continued) Impairment for assets carried at amortised costs For assets carried at amortised cost, the Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The asset s carrying amount is reduced and the amount of the loss is recognised in statement of comprehensive income. If financing and receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent financial period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in statement of comprehensive income. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (c) Functional and presentation currency Items included in the financial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is the Fund s functional and presentation currency. (d) Income recognition Realised gain or loss on disposal of Shariah-compliant collective investment scheme is accounted for as the difference between the net disposal proceeds and the carrying amount of Shariah-compliant investments, determined on a weighted average cost basis. (e) Management fee rebate Management fee rebate is derived from the Fund s investment in Shariah-compliant collective investment scheme on an accruals basis to ensure no double charging of management fee. It is accrued daily based on the fair value of the Shariah-compliant collective investment scheme held. 17

20 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Cash and cash equivalents For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (g) Taxation Current tax expense is determined according to Malaysian tax laws at the current rate based upon the taxable profit earned during the financial period. Tax on income from foreign collective investment scheme is based on the tax regime of the respective countries that the Fund invests in. (h) Unit holders capital The unit holders contributions to the Fund meet the criteria to be classified as equity instruments under MFRS 132 Financial Instruments: Presentation. Those criteria include: the units entitle the holder to a proportionate share of the Fund s NAV; the units are the most subordinated class and class features are identical; there is no contractual obligations to deliver cash or another financial asset other than the obligation on the Fund to repurchase; and the total expected cash flows from the units over its life are based substantially on the profit or loss of the Fund. The outstanding units are carried at the redemption amount that is payable at each financial period if unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at prices based on the Fund s NAV per unit at the time of creation or cancellation. The Fund s NAV per unit is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. (i) Segment information Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. 18

21 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Critical accounting estimates and judgments in applying accounting policies The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. Estimates and judgment are continually evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In undertaking any of the Fund s investment, the Manager will ensure that all assets of the Fund under management will be valued appropriately, that is at fair value and in compliance with the SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework. However, the Manager is of the opinion that in applying these accounting policies, no significant judgment was required. 3. RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund aims to achieve moderate capital growth by investing in a portfolio of Shariahcompliant collective investment schemes that invest primarily in Shariah-compliant equities and/or Sukuk. The Fund is exposed to a variety of risks which include market risk (inclusive of price risk), credit risk and liquidity risk. Financial risk management is carried out through internal control process adopted by the Manager and adherence to the investment restrictions as stipulated in the Deed and SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework. (a) Market risk (i) Price risk This is the risk that the fair value of an investment in collective investment schemes will fluctuate because of changes in market prices (other than those arising from interest rate risk). The value of Shariah-compliant collective investment schemes may fluctuate according to the activities of individual companies, sector and overall political and economic conditions. Such fluctuation may cause the Fund s NAV and prices of units to fall as well as rise, and income produced by the Fund may also fluctuate. The price risk is managed through diversification and selection of Shariahcompliant collective investment schemes and other financial instruments within specified limits according to the Deed. 19

22 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Market risk (continued) (ii) Currency risk Currency risk is associated with investments that are quoted and/or priced in foreign currency denomination. Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Manager will evaluate the likely directions of a foreign currency versus RM based on considerations of economic fundamentals such as profit rate differentials, balance of payments position, debt levels, and technical chart considerations. (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Fund. For amount due from Manager, the settlement terms receivable from the Manager are governed by the SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework. For amount due from Manager of collective investment scheme, the Fund will invest with an investment management company of the collective investment scheme which is authorised or approved by the relevant regulatory authority in its home jurisdiction. (c) Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting its financial obligations. The Manager manages this risk by maintaining sufficient level of liquid assets to meet anticipated payments and cancellations of the units by unit holders. Liquid assets comprise bank balances, which are capable of being converted into cash within 7 business days. The Fund s investment in Shariah-compliant collective investment scheme is realisable which are capable of being converted into cash within 10 business days. This is expected to reduce the risks for the entire portfolio without limiting the Fund s growth potentials. (d) Capital risk management The capital of the fund is represented by equity consisting of unit holders capital of RM9,986 and accumulated losses of RM198. The amount of capital can change significantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unit holders. The Fund s objective when managing capital is to safeguard the Fund s ability to continue as a going concern in order to provide returns to unit holders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Fund. 20

23 3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Fair value estimation Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The fair value of financial assets traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the financial period end date. The Fund utilises the last traded market price for financial assets were the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager will determine a point within the bid-ask spread that is most representative of the fair value. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets that are not traded in an active market is determined by using valuation techniques. (i) Fair value hierarchy The table below analyses financial instruments carried at fair value. The different levels have been defined as follows: Quoted prices (unadjusted) in active market for identical assets or liabilities (Level 1) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (Level 3) The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. 21

24 3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) Fair value estimation (continued) (i) Fair value hierarchy (continued) Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by the Fund. The Fund considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. Level 1 Level 2 Level 3 Total RM RM RM RM Financial assets at fair value through profit or loss: - Collective investment scheme 6,812-6,812 Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include collective investment schemes. The Fund does not adjust the quoted prices for these instruments. The Fund s policies on valuation of these financial assets are stated in Note 2(b). (ii) The carrying values of cash and cash equivalents, amount due from Manager, amount due from Manager of collective investment schemes and all current liabilities are a reasonable approximation of their fair values due to their short term nature. 4. OTHER INCOME Other income represents the Fund s entitlement to management fee rebate from the Manager of the collective investment scheme in which the Fund invests. For the financial period from 24 November 2017 (date of launch) to 30 June 2018, the other income is recognised at a rate of 1.00% for CIMB Islamic Enhanced Sukuk Fund, 0.95% for CIMB Islamic Sukuk Fund and 1.85% for CIMB Islamic DALI Equity Fund calculated and accrued daily based on the NAV of the collective investment schemes. 5. MANAGEMENT FEE In accordance with the Deed, the Manager is entitled to a maximum management fee of 3.00% per annum, calculated daily based on the NAV of the Fund. For the financial period from 24 November 2017 (date of launch) to 30 June 2018, the management fee is recognised at a rate of 1.50% per annum. There will be no further liability to the Manager in respect of management fee other than the amount recognised above. 22

25 6. TRUSTEE S FEE In accordance with the Deed, the Trustee is entitled to a maximum fee of 0.035% per annum, calculated daily based on the NAV of the Fund. For the financial period from 24 November 2017 (date of launch) to 30 June 2018, the Trustee s fee is recognised at a rate of 0.035% per annum. There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 7. TAXATION (date of launch) to RM Tax charged for the financial period: - Withholding tax - A numerical reconciliation between the loss before taxation multiplied by the Malaysian statutory income tax rate and tax expense of the Fund is as follows: (date of launch) to RM Loss before taxation (198) Taxation at Malaysian statutory rate of 24% (48) Tax effects of: - Investment income not subject to tax (543) - Expenses not deductible for tax purposes Restriction on tax deductible expenses for Wholesale Funds 367 Taxation - 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM Designated at fair value through profit or loss at inception: - Collective investment scheme 6, (date of launch) to RM Net loss on financial assets at fair value through profit or loss: - Unrealised fair value loss (188) (188) 23

26 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Name of Counter Aggregate Market Percentage Quantity cost value of NAV Units RM RM % COLLECTIVE INVESTMENT SCHEMES CIMB Islamic Enhanced Sukuk Fund 1,982 2,000 1, CIMB Islamic Sukuk Fund 1,595 2,000 2, CIMB Islamic DALI Equity Fund 2,547 3,000 2, TOTAL COLLECTIVE INVESTMENT SCHEMES 6,124 7,000 6, ACCUMULATED UNREALISED LOSS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (188) TOTAL FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 6, CASH AND CASH EQUIVALENTS RM Bank balances NUMBER OF UNITS IN CIRCULATION (UNITS) (date of launch) to No. of units At the date of launch - Add : Creation of units from applications 10,107 At the end of the financial period 10,107 24

27 11. MANAGEMENT EXPENSE RATIO ( MER ) CIMB ISLAMIC BALANCED WHOLESALE FUND-OF-FUNDS (date of launch) to % MER 0.15 MER is derived based on the following calculation: MER = (A + B + C + D + E) x 100 F A = Management fee (including management fee rebate) B = Trustee s fee C = Audit fee D = Tax agent s fee E = Other expenses F = Average NAV of the Fund calculated on a daily basis The average NAV of the Fund for the financial period calculated on a daily basis is RM6, PORTFOLIO TURNOVER RATIO ( PTR ) (date of launch) to PTR (times) 0.53 PTR is derived based on the following calculation: (Total acquisition for the financial period + total disposal for the financial period) 2 Average NAV of the Fund for the financial period calculated on a daily basis where: total acquisition for the financial period total disposal for the financial period = RM7,000 = NIL 25

28 13. UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER, AND SIGNIFICANT RELATED PARTIES TRANSACTIONS AND BALANCES The related parties and their relationship with the Fund are as follows: Related parties CIMB-Principal Asset Management Bhd CIMB Group Sdn Bhd CIMB Group Holdings Bhd ( CIMB ) CIMB Bank Bhd Subsidiaries and associates of CIMB as disclosed in its financial statements Relationship The Manager Holding company of the Manager Ultimate holding company of the Manager Fellow related party to the Manager Subsidiaries and associated companies of the ultimate holding company of the Manager Units held by the Manager and parties related to the Manager There were no units held by the Manager, the Directors or parties related to the Manager as at the end of the financial period. In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions and balances. The Manager is of the opinion that all transactions with the related companies have been entered into in the normal course of business at agreed terms between the related parties (date of launch) to RM Significant related party transactions Purchase of Shariah-compliant collective investment schemes: - CIMB-Principal Asset Management Bhd 7, RM Significant related party balance Shariah-compliant collective investment schemes managed by the Manager: - CIMB Islamic Enhanced Sukuk Fund 1,999 - CIMB Islamic Sukuk Fund 2,007 - CIMB Islamic DALI Equity Fund 2,806 6,812 26